The financial ruin of France, following the American Revolution, and the French Revolution in 1789
Jack Bowen
The cost of the American Revolution of 1776 did not lead to the French Revolution of 1789. France’s debt problem, created in part by its role in the American Revolution, could have been managed by the King. In this sense, fiscal and economic hardship played a crucial role in the French Revolution but the American Revolution itself did not. Other factors played a significant role. The enlightened culture of 18 th -century France divided the literate members of the French population from their Bourbon leadership. This new 'revolutionary' culture was then drawn upon by political actors to mobilize and radicalize the population into revolution. At the centre of all of these issues, however, was Louis XVI. A weak and chronically indecisive king, Louis must take the lion's share of the blame for failing to halt France's headlong fall into political, social and economic disaster. 1 He may not have directly caused all of these factors, but he failed to deal with them effectively, and in some cases, he exacerbated them. Therefore, Louis XVI is the most important factor in starting the French revolution. The American Revolution created significant issues for the monarchy, but it did not directly lead to the French Revolution. While it did balloon the government's debt, the monarchy was not doomed. After the Seven Years' War, the French national debt reached 2.324 billion Livres, but the finance minister, Joseph Terray, balanced the books by 1774. Working in a stable political environment with a subjugated judicial system, Terray was able to push through financial reforms which saved the French government. 2 This proves that the French financial system was more than capable of dealing with catastrophic levels of debt. Another factor must have played a crucial role. This was Louis XVI. His mishandling of French financial affairs, and French finance ministers, drove France to bankruptcy and r evolution. France’s decision to intervene in America was always going to be expensive. This was worsened by Louis’s refusal to levy new taxes, which forced his finance minister Jacques Necker, to pay for the war entirely through loans. Despite this restriction, the debt Necker accrued by 1781 was not too serious. The problem was that the nature of the loans changed. They switched from perpetual annuities to life annuities meaning they could not be paid back after death. This increased the amount of money to be repaid each year from 5% to 10%. And then, to boost public confidence and to reassure France’s creditors about the health of French finances, Necker moved the Governments spending out of the King’s private realm and i nto the public sphere. In 1781 he published his 'Compte rendu au Roi', the first public budget. Public opinion now became much more powerful as state finance became a central topic of debate among the literate classes. However, Necker had lied. He claimed there was a surplus of 10 million Livres when in fact there was a deficit of 15 million Livres. 3 While this boosted public confidence initially, it eventually backfired. Finance ministers who came after Necker were unable to convince the public of the nee d to reform without explaining that the country’s financial position was based on a lie. Necker was also responsible for trying to centralize the French financial system. He put a stop to dominant ministers at court dictating their department’s spending an d he
1 Norwich 2018: 186. 2 Jones 2002: 291. 3 Ibid.: 317.
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